Following a significant drop last month, the SAFE Manager Sentiment Index fell slightly again in May, from +0.15 to +0.10 points. The decline stems mainly from uncertainty around the geopolitical situation and its impact on firms’ future profits discussed in the earnings calls. Sentiment in the analyzed financial reports improved marginally due to positive business performance in the first quarter of 2026.
In the long term, companies expect the conflict in the Middle East to lead to higher commodity prices and interest rates, putting pressure on firms’ profits, although the exact impact remains difficult to assess. US tariff policy also continues to be a source of uncertainty.
At the same time, many companies see efficiency and cost management as key factors enabling them to achieve strong results despite a challenging environment.
“The continued decline in the SAFE Manager Sentiment Index suggests that managers remain cautious as the conflict in the Middle East drags on and hopes for a swift normalization of the flow of commodities have yet to materialize”, says Florian Heider, Scientific Director of the Leibniz Institute for Financial Research SAFE.
“The strong start to the 2026 fiscal year cannot hide the clouded profit outlook”, says Alexander Hillert, who leads the research team behind the SAFE Index. “The data reveal a trend already observed last month: a disconnect between firms’ solid operational performance in the first quarter and their persistently negative expectations for the rest of the year”, he adds.
A good start, yet conflict in the Middle East is weighing on managers’ sentiment
Executives report a “good start” to 2026,using phrases such as: “much better”, “strong growth”, “strong performance”. One stated: “Q1 was a strong start to 2026” which “puts us slightly ahead of our internal plan, and the underlying structural drivers of our business remain firmly intact.”
Yet, managers across the listed companies emphasize the challenges of ongoing geopolitical conflicts. One manager noted: “Uncertainty remains high, just as it does for every company.” Even if the manager was “happy to say that we delivered a strong start to the year” the business had to be managed “against the backdrop of an increasingly complex and uncertain macroeconomic and geopolitical environment, now further shaped by the ongoing conflict in the Middle East.” Other managers emphasized the implications of potentially higher interest rates describing the outlook as “hard to foresee” and “difficult to assess.”
Efficiency gains mitigate the impact of the challenging environment
Several executives mentioned efficiency enhancing profitability. AI plays a growing role in these efficiency gains. One executive said that “based on the efficiency gains we are seeing, both from our operational execution and from ai-driven productivity improvements, we are confident in our margin trajectory”.
Another executive emphasized that efficiency gains help offset negative effects of weaker sales or tariffs: “operational efficiency and disciplined cost control remain a key priority and continue to support profitability despite lower expected sales.”
“Compared to previous crises, such as the start of Russia’s war against Ukraine, the decline in the manager sentiment has been less severe,” Hillert explains. “Companies’ efforts to reduce costs, increase efficiency, and diversify supply chains appear to cushion against the negative impacts of the conflict in the Middle East. However, it remains uncertain how long these corporate measures will be sufficient to sustain profitability,” he notes.
As the situation in the Middle East has not been resolved yet, uncertainty remains high, as reflected in the managers' use of uncertainty words: after a strong increase to 1.57% in the previous month, the measure increased slightly to 1.58% this month.
Heider comments: “Uncertainty remains highly present in the communication of managers because of the unresolved conflict involving Iran. Unlike measurable risks, the geopolitical situation is difficult for companies to assess and to incorporate into planning and investment decisions.”
The SAFE Manager Sentiment Index
The SAFE Manager Sentiment Index measures the optimism or pessimism expressed by executives of listed companies in Germany monthly. Developed by Alexander Hillert and his team at the Leibniz Institute for Financial Research SAFE, the Index is based on automated text analysis that evaluates positive and negative statements in financial reports and earnings calls. The Index is based on a three-month rolling window of data.
Since May 2025, the team has systematically measured uncertainty expressed in financial communication, using the Loughran and McDonald Dictionary of Uncertainty Words. This analysis captures uncertainty based on narratives – how often corporate leaders express ambiguity, risk, or doubt. It enables pinning down what top managers are uncertain about.
The future scheduled release dates are:
- Wednesday, 10 June 2026
- Thursday, 9 July 2026
- Tuesday, 11 August 2026
